Will direct-spun PSF fall back after surging？

Direct-spun PSF fluctuated upward to high level since 2021. Especially before and after Spring Festival holiday (Feb 11-17), it rose from 6,000yuan/mt to 7,800yuan/mt with an increase of 30%. Polyester yarn was pushed up by the rise of raw materials with an increase of 1,500-2,000yuan/mt.

Alongside the surge of prices, the cash flows of different products have changed.

The cash flow of direct-spun PSF expanded obviously compared with that before the holiday and stayed at about 1,000yuan/mt at present. Polyester yarn had seen cash flow compressed due to stable price before the holiday. With quick increase in price after the holiday, its cash flow enlarged gradually and averaged at 700-800yuan/mt now.

Direct-spun PSF inventory was at very low inventory and most plants sold out, while the stocks of raw materials in polyester yarn mills could be used to end-Mar to early Apr in general, with some lower at about 20 days and higher at about two months.

For direct-spun PSF plants, they can raise prices smoothly if any favor comes, and downstream polyester yarn mills are also capable to accept high-priced raw materials due to high profit despite high raw materials inventory. Thus, the cost transfers smoothly from direct-spun PSF to polyester yarn.

However, the cost transfer from polyester yarn downward is unclear. The favorable sales of polyester yarn in South China after the holiday mainly benefitted from stockpile of traders instead of fabric plants. Currently, the operating rate of fabric plants was at 30-40% and most of them will resume production until Feb 26. On the other hand, the fabric plants have raised prices, but the trades were scarcely done. Terminal orders in Mar win attention of the market.

In addition, PSF futures moved high and then fell on Feb 23, and some traders settled after gaining profit. However, spot direct-spun PSF plants still showed strong intention to keep current price, strengthening the basis. For example, spot direct-spun PSF was traded at 7,900-8,000yuan/mt in Fujian on Feb 23 while PSF futures closed at 7,970yuan/mt, flat to spot one.

As things stand, it needs to avoid downward risks of direct-spun PSF despite current high price. But due to many backorders, it is not possible to fall at a high speed. Some traders may provide lower price for profit, but with enough stocks of raw materials downstream, the trades are not possibly done largely, which will not drag the market much.